Google loses on appeal, will face AdWords trademark suit

A US Court of Appeals has reinstated a case in which a computer repair company …

Google's ability to continue to use other companies' trademarked names in selling and placing advertising will be decided at trial. That's the message sent last Friday by the US Court of Appeals for the Second Circuit, which vacated an earlier ruling in Google's favor. The search giant may still prevail at trial, but the Electronic Frontier Foundation is already voicing concerns about the possibility that the case could have far reaching consequences for company critics.

We've laid out the basics of the case, Rescuecom v. Google, in our past coverage. Google's AdWords program can allow competitors to purchase ads based on the appearance of a company's name or trademarked product names in search terms; those ads will then appear alongside links to the actual company/product in question. The Keyword Suggestion Tool, also offered by Google, will sometimes suggest the use of trademarked terms when companies are considering buying ads for their products and services.

Rescuecom, a computer repair and service company, objected to the fact that its competitors' ads would appear when consumers searched for it by name, and it sued Google for trademark infringement, citing portions of the Lanham Act. In 2006, a Second Circuit judge dismissed the case prior to trial, citing a precedent from the year before, 1-800 Contacts v. WhenU. In that case, an adware program detected visits to corporate websites via their URLs, and triggered ads in a separate popup window.

The gist of the current ruling (a PDF hosted by the EFF) is that the earlier court ruling misapplied the precedent. The earlier popup ads were triggered by a corporate URL, rather than a trademarked product or service name. They also appeared in a separate window, which contained branding information from the ad service provider—these features, the appeals court ruled, will limit any confusion on the part of consumers, who might otherwise mistake the advertised brand for the trademarked one.

With precedent out of the way, the court determined that Google was appropriating trademarked terms. The search giant's claims that it was only using them internally, as part of its ad-placing algorithm, was considered disingenuous; after all, the court noted, its Keyword Suggestion Tool was specifically suggesting to potential ad buyers. The only outstanding issue the court identified was whether the results—ads placed as "Sponsored links" that appear in a separate box above the search results—fit the legal standard of causing trademark confusion among those performing searches. That issue, the court determined, was best settled trough a trial. As such, it vacated the earlier ruling and remanded the case to the court in which it originated for further proceedings.

This hardly means that Google has lost; it remains possible that the company will prevail at trial. Even failing that, it might be possible to change the visuals associated with search results in a way that reduces the possibility of trademark confusion to legally tolerable levels. But it does make it far more likely that Google will have to defend itself in court, a process that is far more expensive than winning a summary dismissal.

Given that this is a case that appears to be all about commercial interests, you might be wondering why the EFF is following the case—in addition to hosting this decision, it filed an amicus brief in favor of allowing the earlier decision to stand. The EFF's concern is based on the fact that many noncommercial groups use Google's service, as well as similar technology from other companies, to make the public aware of their criticisms of products and companies. So, for example, environmental or labor groups could purchase ads based on the appearance of specific products or companies in search terms. These ads would then make a wider audience aware of their issues with the search terms. In a specific example, a search for "clean coal" returned two ads for sites that essentially called the term an oxymoron.

From the EFF's perspective, this is noncommercial free speech, and is accordingly protected from the statues cited by Rescuecom. It still feels that the noncommercial groups will prevail in court. But the Appeals Court's ruling now makes it more likely that they can be dragged into trial and face large legal expenses as a result; the EFF suspects that these legal costs will cause many public interest groups to settle, rather than incur the costs.

11 Reader Comments

This raises the question of it's legal for a company which shows ads (Google, a TV/radio station, a newspaper/magazine) to show an ad which uses a trademark without the trademark-owner's consent. Are they liable for what their advertisers say?

I actually think that they might have a pro-consumer competition argument to be made - allowing adwords to trigger competitor product ads may both educate consumers as to availability of alternatives, and may allow comparisons that benefit the consumer. Competition generally is perceived as beneficial to the public. Trademark usually goes to confusion, and promoting competition, provided it's labeled correctly to avoid confusion, is actually a good thing.

Maybe Google should just add a clause to their contracts which says that they have the right to use the trademark for all search routines. Of maybe Google should just remove Rescuecom completely for their search engine. Find out how they like no one ever hearing from them again.

See, the slippery slope that vw_fan17 mentioned is actually a two-way street. For example, if I entered in "Camero" looking for a local GM dealer to buy a Camero from, then I'd be unlikely to care if Ford links are returned under the "Sponsored Links" section. Therefore, GM getting their panties in a tizzy would be kind of pointless. However, if I entered in "Camreo" because we all make mistakes, and then GM didn't return at all in the results because it only links to knock-off and spam sites that capitalized on all possible misspellings of "camero", then GM potentially loses a sale because they were not allowed to buy the same advertising possibilities.

So really, it seems to me that one must take the good with the bad. If people goof and misspell something, then chances are their trademarked product will return in the results, the sponsored section, or in a suggestions link. If they don't goof, and a competitor's brand comes up under the clearly-labeled and shaded "Sponsored Links" section, then it's unlikely anyone but the strongest of fools or uninitiated Internet users would ever confuse the links there with the actual results they searched for.

The EFF does have a valid point in the consumer information/criticism results that return there as well. A brand shouldn't have the right to stifle critics of their products/services simply because they get this precedent set of Google not being able to capitalize on a trademark search.

Actually, while we are certainly concerned that critics could be exposed to trademark infringement liability for "buying" a trademark as an AdWord, we're more troubled by the possibility that Google, facing spiraling litigation costs, will simply not allow anyone to purchase trademarks (at least if the TM owner objects -- see, e.g., Yahoo's policy).

If that were to happen, everyone with a legitimate reason to reach an audience interested in information regarding a major brand would lose this opportunity. That's the problem with a rule that chills an intermediary like Google -- if Google pulls the plug, everyone loses, even if they would otherwise not be sued.

I don't agree. Here is Google's solution, and they need to do this fast to limit lawsuits:

1- Ads designating non trademark owner:Just like google currently has "affiliates" designate themselves as such in ads, before allowing an ad to be posted. Folks using a trademark keyword can designate themselves as a "non-trademark holder" in the ad. And never be at the top position when the trademark holder is also using adwords.

2- BadgesGoogle uses badges in adwords to show folks that an advertiser uses google checkout. The same can be done for trademark owners. Badges stating trademark owner status can be created to let people know who is the trademark owner of the keyword just searched for.

3- A combination of the above, or let international rules pervade. Google international can block trademarks as keywords. It is only in the USA Canada, and Ireland that this problem regarding using trademarks as keywords exists.

There is no reason that google cannot change a bit, and stop these lawsuits flat.

It appears that they want to continue spending money on lawyers rather than finding a good solution for everyone.

We'll see what happens when I buy into Adwords with two websites, one, hooked to "Google" returning an ad for "Yahoo" (or some other ASE); and another hooked to "Google" and returning a snippet ad "What a joke! They do evil"